How to keep your inheritance
The most vulnerable at risk people to be caught for Inheritance Tax are only children or nieces/ nephews.
If you stand to inherit property or assets from parents but are worried about getting caught in the current inheritance tax ‘trap’, a life insurance policy might be an effective way to avoid paying the full whack.
Over the last few years, the Government has reduced the tax-free threshold for capital acquisitions tax (CAT) to €335,000 for people who stand to inherit assets when their parents die.
So if a deceased husband and wife willed their family home worth €1,000,000 to their only child, then (and as long as they had not been living there) they would be facing an inheritance tax bill of €219.450 on the last death of either spouse.
This begs the question, where do the children find the funds to pay this tax bill?” Sadly, for most, they may have no choice but to sell the family home or delve into any family savings or investments that have been willed onto them.
However, there is a simpler and more cost-effective solution, which is to take out a Section 72 life insurance policy that will pay the tax bill for them.
This life assurance benefit does not form part of the estate asset value, as it is specifically written under section 72 of the Taxes Consolidation Act 1997 to pay inheritance tax.